Tag: Peter Green


Changing Banking for Good or for Better?

The following post comes to us from Jeremy Jennings-Mares, partner in the Capital Markets practice at Morrison & Foerster LLP, and is based on a Morrison & Foerster client alert by Mr. Jennings-Mares, Peter J. Green and Nimesh Christie.

The UK Parliamentary Commission on Banking Standards (the “Commission”) published its much anticipated report (the “Report”) [1] on 19 June 2013 entitled “Changing Banking for Good”. The Government provided its response (the “Response”) [2] to the Report on 8 July 2013, stating that it agrees with the principal recommendations of the Report. It states, however, that there are certain recommendations that require more detailed work to ensure effective implementation, and other recommendations that the Government disagrees with, but intends to achieve the goals of the Commission in other ways. The implementation of the recommendations in the Report will change banking in the UK permanently; the question remains whether they will change banking for the better.

The Commission, chaired by Andrew Tyrie MP, was established in July 2012 following the very public recent controversies affecting banks, including issues arising from the setting of the LIBOR rate, to make recommendations regarding improving the culture, professional standards and governance of banks. The Report contains proposals which fall into five main categories:

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Out of the Shadows and Into the Light

The following post comes to us from Jeremy Jennings-Mares, partner in the Capital Markets practice at Morrison & Foerster LLP, and is based on a Morrison & Foerster bulletin by Mr. Jennings-Mares, Peter Green, and Lewis Lee.

For the last four years, regulators and law makers have been focusing extraordinary efforts on ensuring that financial regulation is adequate to protect the financial system from risks emanating from the banking sector. However, it is only more recently that policy makers have turned their attention towards possible systemic risk related to entities which carry out similar functions to the banking sector or to which the banking sector is otherwise exposed. Such entities have, for convenience, been grouped under the heading of “shadow banks”, although no precise definition or description of shadow banking has yet been agreed upon by policy makers.

At their November 2010 Seoul Summit, the leaders of the G20 nations requested that the Financial Stability Board (FSB) develop recommendations to strengthen the oversight and regulation of the shadow banking system in collaboration with other international standard setting bodies, and in response to such request, the FSB formed a task force with the following objectives:

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The Current State of Europe’s Derivative Markets Regulation

The following post comes to us from Michael O’Bryan, co-chair of the global M&A Group and a partner in the Corporate Finance Group at Morrison & Foerster LLP, and is based on a Morrison & Foerster Client Alert by Peter Green, Jeremy Jennings-Mares, and Lewis Lee.

After the publication of fifteen revised drafts of the long-awaited Regulation of the European Parliament and Council on OTC Derivatives, Central Counterparties and Trade Repositories (commonly known as “EMIR”), you would be forgiven for thinking that the Europeans were never likely to see a conclusion to legislative attempts to regulate their over-the-counter (“OTC”) derivatives market. However, on 9 February 2012, a trialogue meeting of the European Parliament, the Council and the European Commission at long last reached agreement on the final text of EMIR [1], and since we last provided an update on OTC derivatives reform in the EU [2], the wheels of the legislative process have turned extensively, even if slowly.

Although the publication of the legislation finally puts in place the broad regulatory framework to govern the OTC derivatives market and establishes common rules for central counterparties and trade repositories, much of the real detail has yet to be drafted. The European Securities and Markets Authority (“ESMA”) now has responsibility for putting the flesh on the bones, in the form of drafting scores of technical standards to implement the EMIR provisions.

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A Blueprint for Contingent Convertible Securities?

The following post comes to us from Michael O’Bryan, co-chair of the global M&A Group and a partner in the Corporate Finance Group at Morrison & Foerster LLP, and is based on a Morrison & Foerster Client Alert by Peter Green and Jeremy Jennings-Mares.

It has probably not escaped the attention of the reader that European banks, and their ability to meet their continuing funding needs, have been some of the principal victims of the continuing uncertainty surrounding the future of the Eurozone, due to their exposures to Eurozone sovereign debt. As part of its general efforts to increase market confidence in European banks, the European Banking Authority (EBA) published a Recommendation [1] on 8 December 2011 as to the creation and maintenance of temporary capital buffers by European banks.

The EBA recommends that European banks should have created, by 30 June 2012, a temporary capital buffer by attaining a Core Tier 1 capital ratio of at least 9 percent.

The Core Tier 1 capital ratio is to be calculated by comparing a bank’s Core Tier 1 capital to its risk-weighted assets. “Core Tier 1 capital” is defined to include ordinary shares or similar instruments, but also newly-issued contingent convertible instruments if their terms comply with a new common term sheet for such instruments (“Buffer Convertible Capital Securities” or “BCCS”) set out by the EBA in Annex III to the Recommendation. This represents the first time that a European banking authority has laid down in such detail the core terms that such an instrument should possess in order to count as Tier 1 capital. Existing convertible capital instruments of European banks will not be counted towards the 9 percent ratio, unless they convert into Core Tier 1 capital by the end of October 2012.

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Progress on International OTC Derivatives Reform

The following post comes to us from Jeremy Jennings-Mares, partner in the Capital Markets practice at Morrison & Foerster LLP, and is based on a Morrison & Foerster bulletin by Mr. Jennings-Mares, Peter Green, and Nimesh Christie.

On 11 October 2011, the Financial Stability Board (the “FSB”) published its second progress report (the “Report”) [1] and accompanying press release [2] on the implementation of reforms to the over-the-counter (“OTC”) derivatives market. This follows its initial progress report published on April 15, 2011, [3] in which it expressed concern regarding many jurisdictions’ likelihood of meeting the end of 2012 deadline set by the G-20 and warned that to achieve this target, jurisdictions needed to take “substantial, concrete steps” toward implementation urgently. The Report, which comes out merely one year before the end of 2012 deadline, contains a more detailed review of progress towards meeting the commitments reached at the G-20 Pittsburgh summit in September 2009, to be enforced by end of 2012, including:

  • all standardised OTC derivative contracts will be traded on exchanges or electronic trading platforms and cleared through central counterparties, where appropriate;
  • OTC derivative contracts will be reported to trade repositories (“TRs”); and
  • non-centrally-cleared contracts will be subject to higher capital requirements.

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